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Transcript
Corporate Social Responsibility and
Cause Related Marketing: an Overview
(International Journal of Adveristing, 2001)
by
Peggy Simcic Brønn, Associate Professor
and
Albana Belliu Vrioni, MSc Student
Norwegian School of Management BI
P. O. Box 580
1301 Sandvika Norway
ph. 47 67 55 74 13
fax 47 67 55 76 76
e-mail: [email protected]
Summary
This paper looks at the subject of corporate social responsibility and how companies
use it in their marketing communication activities, a practice known as cause related
marketing (CRM). According to the definition of Angelidis and Ibrahim (1993),
corporate social responsibility is "corporate social actions whose purpose is to satisfy
social needs". Corporate social responsibility requires investment and it yields
measurable outcomes.
It is commonly accepted that cause related marketing is a communications tool for
increasing customer loyalty and building reputation. The expected change in
company's image because of CRM campaigns appears to depend a great deal upon
how customers perceive the reasons for company's involvement in cause related
programs and the amount of help given to the cause through a company's involvement
(Webb & Mohr 1998). Mohr et al. (1998) suggest that consumers with a high level of
skepticism will be less likely to respond positively to CRM campaigns as opposed to
consumers with a low level of skepticism.
Key words:
Corporate social responsibility
Cause related marketing
Skepticism
Introduction
It is generally recognized that today’s market place is characterized by a great many
products with similar quality, price and service. In their ever-increasing need to
differentiate themselves and their product, many companies are turning to the use of
cause related marketing (CRM) as a communications tool. Basically, the concept
entails firms’ communicating through their advertising, packaging, promotions, and
so on, their corporate social responsibility, i.e. their affiliation or work with non-profit
organizations or support for causes. The point is to attract consumers wanting to make
a difference in society through their purchasing. However, consumers are looking
closely at companies who make claims regarding their involvement in social issues.
There is a level of consumer skepticism that often makes consumers doubt what a
firm is saying. It has even been suggested that because so many firms are now using
CRM, particularly in the UK, skepticism is on the rise (O’Sullivan, 1997; Rogers
1998). This skepticism can lead consumers to reject claims made in CRM campaigns,
it can affect their purchasing behavior and could even lead to stronger actions
(Rogers, 1998). Therefore not only is it important for companies pursuing CRM to be
genuine in their behavior they must also have a full understanding of their consumers’
knowledge of CRM and their level of skepticism before attempting this marketing
technique.
Studying cause related marketing on an international level is important as both the
type and extent of the needs expected to be fulfilled from the socially responsible firm
will "depend upon the social segment’s culture and ethics, the legal environment, and
the degree to which the members of the social segment perceive that such needs are
not fulfilled" (Angelidis & Ibrahim, 1993). Clearly, countries that adapt practices
perceived as successful in other countries without researching their own consumers’
attitudes cannot hope to succeed based on the same premises.
Literature review
Corporate social responsibility (CSR) in the form of corporate philanthropy, or
donating to charities, has been practiced since as early as the late 1800s at least in the
US (Sethi, 1977). It was legitimate in so far that it directly benefited the shareholders,
and corporate donations were mostly on the agenda of those companies that could
afford it. Today’s concept of corporate social responsibility was developed primarily
during the 1960s in the USA with the notion that corporations have responsibilities
that go beyond their legal obligations. Different schools of thought on CSR oscillate
between two extremes: the free market concept (classical economic theory)
(Friedman, 1970) and the socially-oriented approach (Freeman, 1984; Wood, 1991;
Smith 1994).
Enderle & Tavis (1998) define corporate social responsibility as "the policy
and practice of a corporation’s social involvement over and beyond its legal
obligations for the benefit of the society at large". According to the definition of
Angelidis and Ibrahim, (1993), corporate social responsibility is "corporate social
actions whose purpose is to satisfy social needs". Lerner and Fryxell (1988) suggest
that CSR describes the extent to which organizational outcomes are consistent with
societal values and expectations. At its grassroots, being socially responsible has been
a concern very much related to the rationale that businesses are more likely to do well
in a flourishing society than in one that is falling apart (McIntosh et al., 1998). Over
the past decades both the concept and the practice have evolved as a reflection of the
challenges created from an ever-changing society.
Table 1: Key definitions associated with corporate social responsibility.
corporate
philanthropy
An activity above and beyond what is required of an organization and can have a
significant impact on the communities in which a company operates (Mullen, 1997;
Lerner & Fryxell,1988). Giving to charities in the form of percentage of pre-tax
earnings, it provides a concrete measure of the social effort of corporate managers.
Corporate philanthropy is likely to enhance the image of companies that have high
public visibility (84% of American adults believe that CRM creates a positive
company image).
social
disclosure
Refers to the company's performance in providing information on societal
initiatives undertaken by the firm. To the extent that corporations provide data on
their societal programs, they are responding to societal needs and expectations
regarding social disclosure (Lerner & Fryxell,1988 ).
company's
environmental
record
Pro-social positioning of many firms is identified with their pro-environment
policies that affect air and water (Mullen, 1997). This increasing concern with
environmental issues is explained through a) the influence that consumers'
environmental concerns have on product offering, b) the multidimensional
character of these issues (Osterhus, 1997).
workforce
diversity
Percentage of women and minorities in the board and/or organization are perceived
as aspects of company's humanistic contribution for equity in the workplace
(Mullen, 1997).
financial
health and
tendency to
grow
Raters attempting to judge a company's social responsibility generally recognize
the importance of the company's financial health. Stanwick and Stanwick (1998)
provide evidence that supports the view that profitability of the firm allows and/or
encourages managers to implement programs that increase the level of CSR, in
other words a corporation's level of social responsibility is affected by the firm's
financial performance. The financial angle, however, is not enough to judge the
level of CSR. A company may have excellent employee benefits but if they go out
of business those benefits become meaningless. Instead, growing companies are
perceived as more pro-social as they can offer employees more opportunities for
advancement (Fombrun, 1998).
community
involvement
Company's that score best for their community involvement appear to make more
charitable contributions, encourage more employee volunteer programs, and have
greater local economic impact (tax revenues, jobs, educational programs, and
investments.
In today's competitive marketplace, however, altruistic intentions alone can no longer
justify charitable giving and expenditures related to philanthropic activities.
Sophisticated customers and stakeholders are looking at the behavior of the firm; are
they donating just to gain good will or are they truly concerned about particular
issues? For their part, corporations regard their contributions today not as outright
donations but as investments that are intended to benefit the company as well as the
recipient (Schwartz, 1996). The most commonly encountered categories of corporate
social responsibility are shown in table 1.
CSR and Reputation
The most obvious link of CSR to overall corporate performance is through the
reputation aspect. Reputations reflect firms' relative success in fulfilling the
expectations of multiple stakeholders (Freeman, 1984; Fombrun, 1996). In their
research on reputation building and corporate strategy, Fombrun and Shanley (1990)
argue that favorable reputation may enable firms to charge premium prices, enhance
their access to capital markets and attract better applicants and investors. Empirical
evidence in their study suggests that the greater a firm’s contribution to social welfare,
the better its reputation.
Reputation, closely related to brand awareness, aids in brand differentiation and
ultimately helps a company gain (through a good reputation) or lose (through a
damaged reputation) competitive advantage (Kay, 1993). As Fombrun and Shanley
(1990) comment: "well-reputed firms have a competitive advantage within their
industries, but poorly reputed firms are disadvantaged". Fombrun (1998) recommends
that the pool of criteria used to evaluate corporate reputations should consider: a)
multiple stakeholders, whose assessments aggregate into collective judgements and b)
the different but overlapping financial and social aspects according to which
stakeholders judge companies.
In their study on "The impact of prior firm financial performance on subsequent
corporate reputation", Hammond & Slocum (1996) present a developed measurement
of corporate reputations reflecting social responsibility. The four attributes of the
measurement explicitly represent company’s relations with key stakeholders:
a. quality of products and services, representing relations with customers;
b. ability to attract, develop and retain talented people, representing relations
with employees;
c. community and environmental responsibility, representing relations with the
environment the company operates in;
d. quality of management, representing management of relations with
stakeholders, awareness of and pro-activity to changes in the business
environment.
Changing attitudes of customers have driven marketers to find new ways to make
marketing relevant to society, dialogue-seeking, responsive and involving (Ptacek &
Salazar, 1997). Consumers are demanding more value for their money. Furthermore,
association with a non-profit can generate positive media coverage, build a reputation
of compassion and caring for a company, enhance its integrity, enhance employees'
motivation and productivity, and publics' preferences (Duncan & Moriarty 1997).
Surveys have shown that most of consumers favor socially responsible companies and
products, (Cone/Roper, 1993, RSW, 1996). One third of Americans say that after
price and quality, a company’s responsible business practices are the most important
factor in deciding whether or not to buy a brand, and if price and quality are equal,
they are more likely to switch to a brand which had a cause related marketing benefit.
Stated Approach
Examples of
Organizations using these
approaches
Description
Capital valuation
Scandia
Understanding, measuring and
reporting upon and managing
various forms of capital.
Corporate Community
Involvement
Diageo, BP
Describing, illustrating and
measuring community
involvement activities and
policies.
Ethical Accounting
Sbn Bank, Scandinavian
public sector
Disclosing processes based
upon shared values with
stakeholders developed
through dialogue, proactive
Ethical Auditing
The Body Shop
Verifying processes for
understanding, measuring,
reporting on and improving the
organization’s social,
environmental and animal
testing performance.
Social Auditing
Van City Credit Union,
Black Country Housing
Assoc., Coop Bank
Externally verifying processes
to understand, measure, report
on and improve an
organization’s social
performance.
Social Balance
Coop Italy, UNIPOL
Regularly reconstructing and
aggregating financial data
across stakeholder groups
specifying financial social
costs associated with ‘social
activities’.
Statement of Principles and
Values
Shell
Developing, evolving and
describing an organization’s
principles in meeting its triple
bottom line responsibilities
‘Sustainability Reporting’
Interface
Processes that identify ways
forward and reports upon
progress against sustainability
principles.
Table 2: Examples of Approaches to Accountability and Examples of Organizations
Employing these Approaches (adapted from Zadek et al. 1998).
Cross-cultural differences in acceptance of CSR
CSR is the expression of a corporation’s level of moral development, where the
values that guide a corporate socially responsible policies, decisions and programs are
products of a variety of normative systems, depending from the culture, religion,
education, etc. (Frederick, 1991). On the other hand the normative universe is large,
diverse, often vague, uncertain of relevance or application, difficult to customize, and
so on. Considering this normative dimension of corporate-society linkages it becomes
clear that CSR is a concept of ‘no single value state’ (Frederick, 1991).
In Europe, for instance, some aspects of CSR are regulated by law. Within a legal
context there is an increasing awareness that the pursuit of profit alone as the purpose
of company’s activity might harm other groups in society and overall create more
harm than good to society. Nevertheless, the views of the Germans, where a
company’s level of social responsibility is evaluated on the basis of its legal record,
differ markedly from those of the British or of the Mediterranean countries (Broberg,
1996). Thus, in Germany where companies are heavily regulated, ‘to comply with the
law is regarded as the central notion of good corporate citizenship…’ (Steinmann &
Kunstmann, 1996). Within the regulatory framework the company is free, but not
obliged, to pursue not-profit goals. This has to mean that the company ‘…may donate
funds for philanthropic purposes, etc., as long as this does not contravene the
regulations’ (Broberg, 1996).
Americans expect companies to respect the spirit and letter of laws and regulation
(accept legal standards, like tax laws, and so on), to respect socio-cultural values
(accept socio-cultural standards, like gender relationship, minority relationship, role
of the family, etc.), as well as to engage selectively in cultural and political life. The
last represents expectations of a more active role and participation of the firm in
setting up the legal framework of business and in solving public policy problems; it
can also imply engaging in philanthropy, educational initiatives, etc. (Enderle &
Tavis, 1998).
In Scandinavia, where the perception of the ‘net-effect’ of businesses is that they
benefit society significantly more than they harm society (Broberg, 1996), social
responsibility joins the list of State duties. Scandinavian countries are so-called
welfare states. A fairly regulated society, in Scandinavia it is only natural that the
State interferes in more or less all aspects of life –- particularly in the economic life.
Thus, the State provides an extensive safety net and a whole range of benefits.
Besides, the Scandinavians have some very significant views with regard to the
position of certain shareholders in the policy of company management, who
ultimately strongly influence the course of corporations’ policy and activity (ibid.).
In Israel, the substance of Jewish social responsibility derives from the
acknowledgement of the centrality of the community and a dominant view in Jewish
culture that accepts business as a value-free enterprise (Pava, 1998). Socially
responsible behavior seems to be regulated by two principles of Talmudic law
designed to promote community well being according to the Talmudic conception of
charity. These are known as the principles of ‘the centrality of the community’ and
the ‘Kofin al midat S’dom’ (the Kofin) principle. Judaism recognizes different levels
of responsibility to those in need following a pattern of hierarchy based on the
centrality of the family within the community. According to this pattern business
engaged in philanthropic activities should meet the needs of those closest to the
business enterprise first, meaning needs of employees, managers, shareholders and
residents of the communities in which a business operates.
In Singapore there exists a system of ‘community chest’ to which companies
contribute a proportion of their profits (L’Etang, 1995). The point is to avoid
problems of manipulation of the recipient and of the exploitation of the act for the
purposes of publicity. It is argued that the effect of such a scheme is to increase social
taxation on companies in an anonymous manner.
Obviously, the socio-cultural and economic environments are so heterogeneous that it
is worth considering the differences and their potential influence in the perception of
CSR.
Cause Related Marketing
The practice of communicating corporate social responsibility in marketing
communications activities is commonly known as cause related marketing. Cause
related marketing (CRM) is defined as the process of formulating and implementing
marketing activities that are characterized by contributing a specific amount to a
designated non-profit effort that, in turn, causes customers to engage in revenueproviding exchanges (Mullen, 1997). In the US, CRM is used as a corporate term for
"working together in financial concert with a charity . . . to tie a company and its
products to a cause" (Ptacek & Salazar, 1997). It is a "dramatic way to build brand
equity . . . as it creates the most added value and most directly enhances financial
performance" (Mullen, 1997). It (societal marketing) can generate the long-term value
needed for a company to survive and achieve competitive advantage (Collins, 1993).
CRM is the latest buzzword for European marketers who have come to realize that
alliances of companies with charities can potentially result in growing market shares
and customer loyalty (Stewart, 1998). Cause related marketing has a great potential in
helping marketers to stay in tune with the mood of the public, as it is more sensitive,
trustworthy and relevant to society (Duncan & Moriarty 1997). Surveys have shown
that most consumers, if price and quality are equal, are more likely to switch to a
brand that had a cause related marketing benefit (R&S Worldwide, 1993; 1996).
USA
Awareness of
companies
supporting causes
UK
68%
79%
Likely to switch to
brands that claim
to help a cause
76%
86%
Likely to pay more
for a brand that
supports a cause
54%
45%
More likely to buy
product that
supports a cause
78%
N/A
Table 3: Studies of consumer attitudes to corporate support of causes. (Duncan &
Moriarty 1997, O’Sullivan 1997; RSW 1993; 1996).
Elaborating further in the field of profitable stakeholder relationships, Duncan (1995)
refers to CRM from a conceptually different angle. What he calls "mission marketing"
(MM) integrates a non-commercial, socially redeeming system into a company's
business plan and operations. Whether it is called CRM or MM, it is "the ultimate
brand contact, the manifestation of company's mission and philosophy, which can
drive communication campaigns and even strategy" (Duncan & Moriarty, 1997).
When properly executed, CRM sells products, enhances image, and motivates
employees. However, CRM can be a very dangerous area for companies to venture
into if not done properly. According to Duncan and Moriarty (1997) this means,
among other things, tying the cause to the organization’s mission, making it long
term, not using it as a short-term tactic to increase sales, and understanding that the
effects are not always easy to measure and whatever effects there are, normally
through enhanced reputation, are very long term. Most Americans, for example, think
of CRM as a believable and effective way to improve the country's social problems
and that it can influence what and where they buy.
A recent focus group survey done by Boulstridge and Carrigan (2000) however
challenges these studies. These researchers found that their respondents did not find
corporate behavior important in their purchasing decisions. They concede that
corporate reputation can provide competitive advantage but they question that it has
the impact on purchasing decision that other research has indicated. The bulk of the
research, however, indicates that the potential to affect buying behavior does exist and
is credited to: a) the value it can add to the brand and thus brand equity, b) the ability
to strengthen relationships with internal and external stakeholders, whose support is
vital to brand equity and ultimately affects the company's bottom line and c) the
ability to make the message believable, less confusing and misleading, and thus lessen
negative effects of customer skepticism (Duncan & Moriarty, 1997).
Skepticism
According to the Oxford Dictionary (1982), a skeptic is a person who is inclined to
question the truth of facts, inferences, etc. Mohr et al. (1998) describe skepticism as
one of two constructs that aid in explaining people’s reactions to communications,
cynicism is the second. While cynicism is characterized by the authors as an enduring
and deep belief, skepticism is more situational and thus not as long lasting. Further,
they quote Kanter and Mirvis (1989, p. 301), who say that "skeptics doubt the
substance of communications; cynics not only doubt what is said but the motives for
saying it". A highly skeptical person will perceive the accuracy of a claim to be low; a
person with a low level of skepticism will rate the accuracy of a claim to be higher.
Ford, Smith, and Swasy (1990) have found that consumers are skeptical of all kind of
claims, even those that are easily verified.
The following statement underlines the paradoxes a firm encounters when considering
cause related marketing.
If they don't say enough about their charity links consumers believe
that companies are hiding something and if they say too much they
believe that charities are being exploited by the big corporations. It
makes the promotion of such schemes one of the most delicate jobs in
marketing. Go too far one way and consumers believe you are using
the charity, go the other way and they will not even know of your
involvement (Tom O'Sullivan, 1997).
Several studies indicate that consumers believe it is important for marketers to seek
out ways to become good corporate citizens (R&S Worldwide, 1996), that cause
related marketing is "a good way to solve social problems" (Ptacek & Salazar, 1997),
and that consumers have a more positive image of a company if it is doing something
to make the world a better place. Yet the level of skepticism toward such schemes that
unite the interests of charity and business remains very high. Webb and Mohr (1998)
make the assumption that skepticism toward CRM derives mainly from customer's
distrust and cynicism toward advertising, which is a component of the marketing mix
used in CRM campaigns. The negative attitudes toward CRM expressed from half of
Webb and Mohr’s (1998) respondents were credited mostly to skepticism toward
implementation and or cynicism toward a firm's motives. Half of the respondents
indeed perceived the firm's motive as being "self-serving". This skepticism is perhaps
further fuelled by recent research results that show that total corporate philanthropy
increases in small but significant ways following negative media exposure (Werbel
and Wortman, 2000). This could be interpreted by stakeholders as an attempt on the
part of these organizations to ‘buy’ their way out of a negative situation.
Nevertheless, consumers express interest in and appreciation of company's
involvement in CRM given that it results in funds being raised for the cause. Barone
et al. (2000) conclude that a firm's support of social causes can influence consumer
choice but simple support is not enough. Marketers must consider how consumers
perceive the company's motivation. In their research, Webb and Mohr (1998) found
that this distinction sometimes led to purchasing based on CRM, and one third of their
respondents admitted that these campaigns have at least some impact on their buying
decisions.
Perceptions that the company is making "much ado about nothing" or that its
promotion does not correspond to the reality of the help being given to the cause can
lead to skepticism. Since skepticism can affect consumers’ purchase decisions
(Szykman et al. 1997), it can be a great help when developing campaign strategies to
have a more thorough understanding of the level of skepticism in target audiences.
Webb and Mohr’s research suggests that consumers with a high level of skepticism
will be less likely to respond positively to CRM campaigns than consumers with a
low level of skepticism toward CRM. It is nearly impossible to influence the opinion
of cynics, according to Mohr et al. (1998), due to their enduring beliefs.
The authors suggest, however, that skepticism can be decreased as knowledge
increases. Boulstridge and Carrington (2000) propose that consumers are not as aware
as the data in table 3 suggest. They found in their research that awareness of company
activity in the area of social responsibility was very low. This, in spite of increased
coverage by the media of corporate activities and the rise of business activity in this
area. They conclude that the effect is just not getting through to the average consumer.
Discussion
Having a pro-social agenda means having a powerful marketing tool that can build
and shape a company’s reputational status, make a differentiation in the market and
give to a company a competitive edge. In today’s business environment firms that last
are those who manage their key relationships well and focus on their reputations.
Differentiating your company/brand through the image of care and compassion to
society is a strategy that can be highly rewarded. However, only a consistent,
believable contribution to a cause (or non-profit organization) can build brand image
and brand equity. For that, corporate philanthropy needs to be strategic.
A firm that is socially responsible acknowledges that it exists and operates in a shared
environment, characterized by a mutual impact of a firm’s relationships on a broad
variety of stakeholders, who are affected by and can eventually affect the achievement
of an organization's objectives. Thus management of stakeholder relationships lays at
the core of CSR and entails establishment of a sound/functioning two-way
communication with stakeholder groups, i.e. understanding the type of support needed
from each group, as well as learning their expectations of business and what they are
willing to pay for having their expectations met.
Knowing how publics perceive companies and what they expect in return for their
support is fundamental in designing communication objectives and strategies aiming
to strengthen relationships with stakeholders. Stakeholders’ support for a business is
based on their relationship and interaction with the brand as well as the way they
perceive the brand and its company. Webb and Mohr (1998) suggest that companies
clearly communicate the terms of the offer and the results as a CRM campaign
progresses. For customers it is important to feel the campaign is trustworthy. Honesty,
long-term commitment to a cause and involvement of non-profit organizations are
factors that help to overcome customers’ skepticism toward CRM. But to properly
manage stakeholder relationships and its reputation, the company not only needs to
adopt CSR as in integral part of a company’s mission. It must also communicate this
to the stakeholders (customer base included).
Research suggests that knowledge has a negative effect on a person’s skepticism level
(Szyckman et al., 1997). This would indicate to marketers that one of the first things
they can do is to emphasize the awareness of corporate social responsibility and its
benefits among consumers. By increasing knowledge, they can then decrease,
according to Szyckman et al., the level of skepticism and thus achieve even higher
favorable behavioral responses. Marketing and corporate communications initiatives
then should concentrate on using tools that are designed to inform and to make
consumers more aware.
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